Thursday, May 6, 2010

Chapter 9. Prospective Analysis

Importance of Prospective Analysis

Security Valuation - free cash flow and residual income models require estimates of future financial statements.

Management Assessment - forecasts of financial performance examine the viability of companies’ strategic plans.

Assessment of Solvency - useful to creditors to assess a company’s ability to meet debt service requirements, both short-term and long-term.


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